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Private equity major Warburg Pincus has bought an additional stake in Havells India by converting warrants allotted to it. These warrants have been converted at a high premium of Rs 690 per share as compared to the current market price of Havells, which is trading between Rs 110-120 for the past one week. Warburg is paying nearly six times the present stock price of electrical equipment maker.

Warburg Pincus entered into a deal with Havells to pick up an 11.2% stake for $110 million in October 2007. The deal involved an issue of 41,60,000 equity shares (7.18% stake) at a price of Rs 625 each and 26,00,000 warrants convertible into shares at Rs 690 each. Warburg paid Rs 69 per warrant aggregating to Rs 15.5 crore at the time of warrant allotment. The deal struck during the bull run of the markets seems to be hitting the private equity giant now.

Warburg has also increased its stake in Havells through open market route last year. Warburg picked up a 3.98% stake through bulk deals on BSE and NSE, which has brought down its average purchase price. Though the exact shareholding after dilution of shares is not known, Warburg now holds nearly 15% stake in Havells. VCCircle could not independently contact Havell’s till the time of writing this report.

If Warburg’s stake increases over 15%, it would trigger an open offer for an additional 20% stake. Though this is unlikely, it would be a good opportunity for Warburg Pincus to bring down the average purchase price substantially.

With public markets having plummeted, the fate of PIPE ( Private Investment In Public Enterprise) investors have proved to be disastrous. Warburg’s other investments in listed entities like ICICI Bank, Moser Baer, Punj Lloyd and Sintex Industries are also bleeding. The private equity major raised a $15 billion global private equity fund last year.

SAIF Partners (Softbank Asia Infrastructure Fund), another private equity fund, has also increased its stake in Havells to 4.92% through open market route. SAIF has also invested in Home Shop18, Just Dial and National Stock Exchange in India.

Havells may use funds from warrant conversion to repay debt from $300 million acquisition of Germany’s Sylvania. Havells had acquired Sylvania to expand its presence in the global market, thus lowering its dependence on domestic market.